380: The Lease Negotiation Lessons That Saved a Childcare Business With Mary Hornbeck

What should every childcare owner know before signing a lease or starting a build-out? Kate Woodward Young talks with Mary Hornbeck, a Kansas City childcare operator who grew from one classroom to four locations, about childcare facility leases, landlord negotiations, build-outs, expansion, and protecting your budget.

Mary shares hard-earned lessons on negotiating long-term leases, rent-free months, build-out costs, and hidden expenses, plus why asking the right questions can save childcare owners thousands of dollars and countless headaches. If you’re a childcare owner, director, or operator considering a new facility, expansion, or lease, this episode is packed with practical advice you’ll want to hear before signing on the dotted line.

To learn more: MSH-Strategies.com
To contact Mary: Mary@msh-strategies.com

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Transcript

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Childcare Conversations 0:00

Welcome to Child Care Conversations, the podcast where early childhood leaders like you get real-world strategies, honest talk, and a whole lot of support. Whether you're running one center or many, we're here to help you lead with confidence and clarity. This episode is brought to you by this quarter's sponsor, Playground, the all-in-one child care management software. We're all about managing monkeys and saving you time at your center. With this platform, you can. We're proud to partner with a team that's as committed to your success as we are. Learn more at tryplayground.com. Now, let's get into today's conversation. One we think you're really going to love.

Kate Woodward Young 0:47

Welcome back to Childcare Conversations. And today's conversation, well, it's gonna be, let's just say, a little outside of the box. And I love that. And so, Mary, I know that you um are based out of Kansas City, correct?

SPEAKER_01 1:05

Yes, Kansas City, yes.

Kate Woodward Young 1:07

Yeah, okay. And so um, I thought we would just start with you telling us a little bit about how you ended up in early childhood, and um we'll go from there on the conversation. I know where we're going, but they don't know where we're going.

SPEAKER_01 1:22

Gotcha, gotcha. Well, Kate, thank you for uh asking me to be here with you. I'm super excited. Um gosh, my career started 30, I'm gonna date myself 36 plus years ago, um 1989. I turned 21 in April, got married in May, and August of that year, my mom said, I need you to take this child care program over for me. I need to have surgery. I just paid for your wedding. So that's what you get to do. And I was a J school major at KU, University of Kansas, and I have a younger brother that's 11 years younger than me, and my mom did home care forever. So I'm like, mom, hey kids, I don't want to do this anymore. I am like, I don't want to do it. She said, Nope, paid for that wedding, and I need you to do this. And you know, God has a mysterious way. So I got I started that and I fell in love with it. Fell back in love with the children, not that I ever really hated them because that really wasn't it. Um, I'm just I'm a redhead, so I'm like, whoo, a little dramatic. And um fell in love with it, but I fell in love with the leadership part of it, and I fell in love with the idea of y'all. If if any of y'all remember back then it was not, um, there was the big moms that stay home, moms that work, and we were all just kind of emerging into this women can work and it's okay. And wow, do that. And so I I just fell in love with that part. I thought, well, I've always had good, my mom always was great to children. I learned how to be great to children. So if moms can't be there, dads can't be there, then why wouldn't we do something that is a good place for children? So that started all that. And about a year into it, my mom was kind of stepping back anyway, and a year into it, the church, we were based in a parochial school and they were adding a classroom a year. So they came and said, uh, yeah, we don't, we need your classroom back next year. We were licensed for 24 total. We had a little room that was the church nursery, and then we had a classroom. And they said, We're not doing any of that daycare stuff. And remember, remember the year. So I was like, okay, well, that's a bummer. So I drove around, found this empty deli in this strip mall, and took my dad to lunch. I said, Dad, I want to do this and I need some money. Convinced the landlord to give me, so my dad convinced my dad to give me $50,000, landlord to give me $50,000. Not give me, lend me. And uh that started what is what um with special beginnings. And I sold in March of 25. And we were multi-site then for centers, and sold it and only sold it because I was just a different different place in my life, and I've been doing it a long time. And uh, so that leads me here to what are the next uh what are the next things? So I'm doing some coaching, doing some consulting, but that's it.

Kate Woodward Young 4:41

Well, and I love the fact that you are here to share your experience because we are definitely gonna dig into some of those experiences, but I think we would be remiss to not talk a little bit about the fact that you have been very, very involved in the Association for Early Learning Leaders and giving the owners their own space. So tell me a little bit about how that came to be. Um, and then we're gonna talk about um we're we're just gonna go with landlords and leases. That's that's gonna be that's that's my title for the episode.

SPEAKER_01 5:13

Not that we have landlords and leases. Okay, got it. Um, gosh, Association for Early Learning Leaders um saved my career, saved, I mean, made me a successful leader back in 1994. I went to my first conference. I've only missed one since then, and I was on bed rest with my young with uh being pregnant, and stood in the stood and watched Donna Thornton. Any of you Donna Roberts, she's known Donna Thornton Roberts, and I was like in tears. I was like, oh my gosh, these people get me because I was so I wasn't I didn't go to school for business. I didn't, I just knew what I loved to do. And the fact that I was sitting next to people in these, in these and having conversations that I'm like, yeah, didn't know what turnover was till I started my own, you know, till I started my own thing, or hey, you know, how do we make more money? And it was okay to say that. It was okay to to to to have those kinds of conversations. So I uh became really, really um actively involved um from pretty much the get-go. We used to be called state liaisons, now they're called ambassadors, and they're a wonderful group of people, and got involved with them, got on the board, was president of the association for about six years, and am still on the board as the legacy um commission for scholarships and such. And so through this, we were like, aside from directors, and um which is a wonderful, wonderful thing that and teaching them leadership as owners of centers, we need to we need to have conversations too. And sometimes you need to have some sensitive conversations without your leadership there with you. So some colleagues, we all sat around, we're like, how could we do this? And so that created what is now known as um EIS, which is executive invitational series. And we go to we well, up until this year, we've been going to Mexico every January, and now this year we're doing a cruise, we're doing a virgin cruise coming up. So, you guys, it's a great thing. And the the wonderful part about it is I have lifelong friendships. My very, very best friends are from AEL. And they do live. We do, we say we do live together. Um, and they're a phone a friend, they're uh, they're a lifesaver when you need them. They're hey, I need to raise rates and I don't, I'm not sure about that, or my PL is awful right now, or any of those sorts of things.

Kate Woodward Young 8:08

Yeah. So I think that's great. And so for if you are not familiar with the Association of Early Learning Leaders, uh, we will make sure that um their links to their website are in the show notes. Uh, we will also in the show notes include uh the link to the executive invitation series if there are still openings by the time this episode goes live. Uh by the time this episode goes live, we've probably also done the business symposium or it's wrapping up pretty fast uh in the Pompano Beach area. And um I don't know in which order episodes will come out. So at some point in time, you guys will hear me do a whole episode on Pompano Beach and uh my very personal connection to the Marriott Hotel where that symposium will be at. Um it is actually on the ground that used to be the Woodward Motel, which is my grandparents' motel in Pompano Beach. And so really I am so excited. So I am really excited to uh be part of that symposium and definitely have a family business connection to um that piece of property. So um unfortunately they were not the ones who sold it to the Marriott, so there's no family legacy of money in there there. Uh they stepped back uh uh in the uh early 60s, but um, I always like to know that at least based on the address, um uh I've I've got a stake in that ground. So um but I think you brought up a great point though, Mary, which is that as owners, you need to also have other owners. And we talk about a lot in this podcast about directors finding your tribe, finding your people, being able to have somebody to call and go, you will not believe what this parent did. And it goes the same thing with the owners. And so it's always great to have owners on who want to talk about why you need those other owners. And sometimes having owners in other states um give you kind of a different perspective, I think, or different types of um communities. So even if they're still in your state, I mean, in Texas, we've got a little bit of everything all over the place. Uh so even if you're in Texas and you're in a major metro, having somebody in a rural community might just give you enough of that reflection. Um, or even just major metros in other major states, I think is just hugely beneficial. But one of the things that you talked about very early on is that you got your landlord on board with you when you started your uh standalone facility that wasn't in partnership with a school. So talk to me a little bit about, because you were, I'm gonna just say, because I based it off of what you had said. Oh my god, you were obviously not very old in the grand scheme of your total career. So this was pretty early in your career, but also pretty early in your adult job life. Uh, how did you like what made you even think to ask the landlord to be involved in the financial part of your business? And what are some things that you learned from that experience? And um, as you moved into four locations, I'm sure you've got some other uh landlords and leases stories. Yes.

SPEAKER_01 11:21

So the landlord then um his name was um Dr. Bear. Uh hi, Dr. Bear. Anyway, um he and small world, yeah, Kansas City, we always say it's three degrees of separation. I'm on the Kansas side, but about 20 minutes from downtown Kansas City, and we're um he operated on my brother when my brother was a child. So he's a so crazy, crazy world. But anyway, um I was like, I I had I didn't know how much it was gonna cost. I hadn't learned all the things that you need to learn about starting a business. Um again, back then childcare wasn't a thing. So I was I was lucky that it had sat empty for a little bit. And I said, well, got some estimates on what it was gonna cost and the budget, I'll never get this forget this number, it was $104,000 for the build out. And I just met with him and at the time he his wife, and I said, Look, my dad can only do $50, and I really want to do this. So can you give me like six months rent-free and I'll build this business up? I'm already bringing kiddos with me, but we're tripling in size. So um, if I do that, then I'll pay you back, I'll pay you interest. And he was it kind of went back and forth. My first this lease was like 30 pages long because his hair was um you wouldn't have thought it would be that long. But anyway, it was and um gosh, it's still there. That center's still there. And I do I think yeah, I think that thing I think one of the things that was important that I learned over the years is I'm like, I'm gonna be successful and I'm not going away. Like, I'm not gonna close my center in five years, I'm not going to relocate. Like, once my families want to be here, then I'm not going anywhere. So we were able to have like a 10-year lease um with some options. And so I think we had 10 years and three or four two-year options. So it just kind of, and and and I was a good tenant. I paid my that was a high priority, that and payroll, you know. Y'all know you gotta you gotta pay your people. And um, so that first little bit of time, some some payrolls, we were kind of sweating bullets there because we were had that was a huge priority to pay my dad back and pay Dr. Bear back and pay the rent. Um, but he he got educated too, because it was like, well, we need a playground, and I the playground should not be part of my rent. You shouldn't add to my rent because I need a playground, because what are you gonna do with that back there anyway? And um so we he um he let me do that. We had a giant, beautiful playground over the years that um way bigger than what we needed, but the kids loved it. And we expanded and added our school age program there back in 2014. So um I think assuring them as confident as I could be, as young as I was. Maybe I was just a little I didn't know what I didn't know too. So, um, and just relying on like, hey, this is what this is. Like we we're gonna be established in the community. We want to be here a very long time. This is my life, this is my career. And um took a lot, took a few meetings, but uh he he was I was lucky that he had money to invest too. So he made he made a little money on me, I made a little money on the deal, and uh we had a great relationship over the years.

Kate Woodward Young 15:21

So well, I love that story. I hope that somebody who's listening understands kind of what Mary was saying, if because you know, sometimes we listen to a story and we don't necessarily grab all the little nuggets. So, you know, Mary made sure to say, look, we plan on being in this community, we're not going anywhere. Sounds like you asked for a longer lease, like you you went in there confident enough to go, no, I don't want a two-year lease, I don't want a three-year lease. You started with a 10-year lease. Did I hear that correctly?

SPEAKER_01 15:48

It was really long, yes. And that's what I did with every other lease. I'm like, we're we're not going away. Um, and while that can be a little scary, I would imagine, it also, especially if you're asking for a huge build-out or you need a loan or things like that, um, you're we're not gonna go anywhere. We're not, it's it's it's unlikely. Not often do you hear, and people do it, I understand that, but you don't really relocate very often.

Kate Woodward Young 16:18

Um, and I think that being bold and asking for that longer lease is so much um into what you're telling your banker, you know, the because you're telling the banker, look, I'm doing a 10-year lease, like I'm not planning on going anywhere. And uh, they're gonna back you with a whole different level of confidence than if you're like, oh, well, they just gave me the standard, you know, five-year lease or whatever the standard lease was in your community. And I think being bold and asking for that longer lease is a great tip for anybody who happens to be listening who rents their property, um, who is not the builder, building owner. Now, with four locations, did you rent all four? Did any of them become property that you purchased at some point in time? How did that evolve over time? Nope.

SPEAKER_01 17:09

We always rent, we always, we always rented. Um, second center um got a phone call as a land developer. I think I told you the story, but he uh he said, Hey, this uh the center's not doing well. Um, they're not able to pay the rent. Would you come take a look at it? The the owner they really want out. And um this was in close to 2000. And I said, Sure, I'll go look. And I walked in, I'm like, oh yeah, we can do this now. Um, and I said, Well, okay. And I'm thinking, okay, well, we can use some of this furniture. Like, you know, you just your head starts to okay, what can we do? And and um he said, they just they just want you to take over their their lease. And I said, Okay. And again, hadn't bought a center before. And uh anyway, ended up buying that center for $10. Um, and um, that was a learning process, but again, had a great lease there because they um they let us have we added onto the playground because I'm like, this playground's not big enough for the for the kids. Um they did, um I said you we need some we need some nicer um nicer build out than what was there. And uh again, I said I'm not going anywhere. So I'm gonna turn this around. And uh that's probably a whole nother podcast about if you go in and buy a center. That was a big learning lesson.

Kate Woodward Young 18:39

We we could definitely have a um um, I took over, I was the director of a program like that. I call it our oh shit school. And um, we thought we were just doing something very similar to what you talked about, and then we realized that the building program had been grandfathered into a lot of licensing requirements and health and safety requirements with the health department. So what we thought was going to be a fairly low-key takeover ended up a massive financial takeover. And um, it was originally licensed for 150 kids. And in 2002, uh the state of Texas required that square footage to have a light smoked linked smoke detector system to be that size, which of course, um back then uh it's it's expensive even by today's standards. But back then, telling somebody you have to pay $15,000 for that kind of a system was like, um, no. So we stayed at 99 because if you went over 100, you had to have that link detector system. So um, yeah, so I can totally relate to the whole, um, yeah, we'll have to we'll come back and do another episode on that, and I'm gonna have to write it down so I remember. But it's like lessons learned. Yes, oh the the lessons learned chat podcast could be its own separate podcast series. But so let's talk about building number three and building number four. So by the time you got through the first one where you were very, very confident and went for that longer lease, the second one where you kind of learned $10 isn't actually $10. Um, what did you what were some of the experiences with location three and location four? Or do you have any tips on renegotiating leases after you've been there for a while?

SPEAKER_01 20:26

Oh goodness. Um, lease three was um at a university where we could we became part of um university, um, chiropractic university. And again, just relationships. I can say um as hard as it is sometimes to get out of your centers or you know, make sure you're you're building those relationships. Um because this was just a hey, you guys are doing a great job. Um, it's a person I went to high school with, she said, my dad, he's uh Dr. Carl Cleveland, he's an amazing man. He's a founder of this university. And I went over and talked to him, and I said, Well, he had an office space that was part of their the campus that he had just purchased. And I said, Um, I can do that. This, but the playground has to be this, it has to be, you know, all the rules that have in Kansas about playgrounds. I said, I'm gonna need a fence and the build out. We need lots of toilets, Dr. Cleveland, lots of toilets and lots of sinks. And so, um again, I said, I don't I'm gonna ask you to um to give us some time to do it. I will sign a long lease. Um, but I'm gonna need like six months, and that's that that's a huge tip. Ask for give yourself some grace on the front end because it takes time to build enrollment. It takes time to get your name out there. And again, part of the compromise with the landlord is it. If you are gonna sign a 10-year, five year, seven year with options, options are landlords like options, so you can do the options, then they should give something on the front end and questions are free. So the negotiation, um that piece about finding your voice, ask for, I mean, why not? Ask for the sun, the moon, and the stars. What are they gonna do? I mean, say no, and then there's the compromise starts. Because you all know that if you're especially we always retrofitted buildings, and so that comes with its own set of stuff. And then learning to work with the construction guys who may or may not have ever done a childcare center. I remember standing at, and this was probably my fanciest center because Dr. Cleveland had certain things he wanted, and um it came became part of the campus community and so on and so forth. And the construction guys were like, Well, why can't you why can't you just put go to babies or us or whatever and buy a changing table? I'm like, no, because it has to be built in. Like, you know, just those conversations, but they're knowing what your um your absolutes are, Kate, like these are the things, this is my vision for this program. This is what I'm bringing to the table, and explaining that to all the people who are who have input into that is questions are free. Just remember that. That's a huge thing. Because what are they gonna do? Like, and and and and and then educating, there's a there's a cool part about it too. Those, those, everybody that was involved with that particular project walked away with a more respect and a better perspective about early education. We weren't, it wasn't just daycare. We were we were we were building an early education program and the child we were getting children ready for for kindergarten and beyond. And I really was proud of the fact that they they came to respect us more, and um they would can't they were continuing to do some stuff. So they would stop in though once we opened and saw the kiddos and all that kind of stuff.

Kate Woodward Young 24:21

So that was then let's talk about number four. Let's talk about location number four. And uh what were the learning experiences? By the time you got to location number four, you'd already done this a couple of times, you knew what to ask for, but I would suspect there was still a bump or two um in that process. That again, what I love about uh sharing these stories on a podcast is that hopefully somebody else will learn and maybe not have the same bumps uh the next time they sign a lease or the first time they sign a lease.

SPEAKER_01 24:56

This the fourth one was at um the uh the original center down the sidewalk. So there was a pizza guy in between us. Um so we were down the sidewalk, and we wanted to do a school age program. Um the glitch there was although the land, you know, Dr. Bear was like, oh, absolutely, you guys do that. That's great. Um you talked about fire suppression systems. Well, that was a long time. That building was really old, and so we were dealing with all of that. And I think on the front end, before you sign away, you're signed on the dotted line with the lease, do all that homework because it's those little things. Well, they're not little things, city codes, and it just depends on their interpretation. It's like it's like um child care regulations, it depends on who's interpreting them. So, and do a face-to-face. Go to the city planner, you know, you're gonna submit your plans anyway, but never let anybody else do that for you. Do face-to-face meetings, sit down with them. They need to like you. Um, because if you're having this great relationship and you're saying, this is what I'm doing for the community, these are the children I'm impacting, they want to work it out with you. They want something good to happen. So that whole fire, fire sprinkler system thing. I'm like, whoa, whoa, whoa, whoa, whoa, whoa. I said, just I want everybody to be safe, but I can't put in the $35,000 fire suppression system. So we worked through that. Um, where were the other codes? There was another.

Kate Woodward Young 26:43

Did you have any kitchen codes? Like so we ended up with a kitchen code that um required all this different plumbing than what was in the commercial kitchen originally. And um, you know, by the time we were done, we had this gorgeous, gorgeous kitchen that was so frustrating because you know, most schools use that kitchen for two hours a day. And so we got very creative and found caterers to partner with, other people to rent the space in the evenings and weekends, because we were like, there's a lot of money in that space to only be used for 10 hours a week. And so we had to get really, well, we didn't have to, we chose to, uh, because, well, it was an unexpected budget item.

SPEAKER_01 27:29

Right? Yep. I totally get that. Yeah, we had our one of the things that we they wanted a a huge vent over the over the stove. And I'm like, we're not going to be like, we don't, we're not a restaurant. And so we ended up having, I finally got them to say we were warming kitchen only, which means we weren't making food from scratch every single day. Like we weren't baking bread, we weren't making like and sometimes we did, but that wasn't, we weren't a restaurant. So that that took a lot. Because my I would I would say to them, hey, what's what's the workaround? Because here's what I'm doing.

Kate Woodward Young 28:14

I like that phrase. Say that again. I want people, I want that as a snippet.

SPEAKER_01 28:18

What's the workaround? Like, how can we make this work? Because here's what I'm here's my goal, and I do have a budget, and I just have the kitchen and oh, and then the the water fountain. We always had filtered water for the children, um, which was a great selling point, um, a great marketing thing. But also, I just wanted the kiddos to have um filtered water, make bottles with the access to their water. So we didn't have traditional water fountains, and they wanted us to have more water fountains. And I'm like, okay, well, see this. There was this like, here's this, the water, and there's pictures in every classroom, and the children. So that was a thing too. Like, I had to say, look, this is this is filtered water for the children. So you have to you have to stand on like it's was really important to me to have that. So don't compromise so much that you walk away from something and go, oh my gosh, why did I do that? Because guess what? You get you have to live with it when during construction, like you have those things cost money to take away at some point. So I never wanted to be like, okay, I really didn't ever sometimes you have to because the regulations, right? But I didn't want to say I I compromised too much and lost maybe a part of what my vision was. Does that make sense? Like that.

Kate Woodward Young 29:38

It does, it does. Well, Mary, thank you so much for giving all of those tips and tricks. Hopefully, folks have like taken. I've taken kind all kinds of notes. Uh, you will see notes and the whole transcript uh below. So please make sure that you go back and create your own lease and landlord checklist. And uh hopefully you're gonna learn a little bit so that you don't have to go through some of those same struggles that Mary and I shared today as far as lessons learned when continuing to do build outs or acquiring new locations. And I love the fact that you hopefully gave people some encouragement on leased locations and not that everybody has to build from scratch. So, with that, if you have not already followed our newsletter, go to childcareconversations.com, click at the button at the top that says newsletter, and sign up. We drop two newsletters a week for both podcast episodes, and we can't wait to talk to you in a few days.

Childcare Conversations 30:40

Thanks for tuning in. We love bringing you real talk and fresh insight from the world of early childhood education. Be sure to follow us on social media to stay connected and catch all of the latest episodes. And if you're planning a conference, training, or special event, Kate and Carrie would love to speak to your audience. You can learn more about their keynote sessions and workshops at kateandcary.com. If you learned something today, share the show and leave us a review below. We'll see you next time on Childcare Conversations.